The Appellate Division has once again confirmed that “distinctions between renters or property owners in the application of zoning and land use laws have no place in the application of legitimate objectives of zoning.”

In Tirpak v. Bor. of Point Pleasant Beach, A-5088-17T1/A-5147-17T1, decided Feb. 11, 2019, the property owner sought to remove a deed restriction imposed as a condition in connection with an earlier use variance. The restriction allowed for the use of the property as a two-family residence only if one of the units was owner-occupied. The trial court vacated the condition after finding it legally impermissible and the municipality subsequently challenged that determination.

On appeal, the court confirmed that it was improper for the zoning board to condition its grant of a use variance on whether the residence was occupied by an owner or tenants. In so doing, the court recognized the well-established principle that while zoning may be utilized to regulate the usage of property it cannot be applied to control the identity or status of the persons occupying the land. SeeDeFelice v. Point Pleasant Beach Bd. Of Adj., 216 N.J. Super. 377 (App. Div 1987) and United Property Owners Ass’n of Belmar v. Borough of Belmar, 185 N.J. Super. 163, 165 (App Div. 1982)). While the Zoning Board argued that the condition furthered the legitimate objectives of controlling noise and nuisance conditions, the court held that such objectives must be achieved through the police powers of the municipality, not its zoning laws.

In sum, a municipality may not employ its zoning laws in a manner that favors property owners and discriminates against tenants.

When a contractor is hired by a commercial tenant to improve the leased property, the contractor’s lien will ordinarily attach only to the leasehold interest, and not the property itself. In a recent Court of Appeals decision, however, the Court clarified in what circumstances the contractor can file a lien against the owner’s interest in the property. Ferrara v. Peaches Café, 32 N.Y.3d 348 (Nov. 20, 2018).

In Ferrara, the tenant leased the commercial property for purposes of operating a restaurant, and its lease agreement with the owner contemplated that the tenant would build-out the space for purposes of operating the restaurant. After allegedly not being paid for work performed, the tenant’s electrical contractor filed a mechanic’s lien naming the owner, and sought to foreclose on the owner’s interest in the property.

Lien Law § 3 provides that the owner must have requested or consented to the work in order for a mechanic’s lien to attach to its interest. Because the owner had no direct dealings with the contractor, and did not “expressly” or “directly” consent to the work, the owner argued that the lien was unenforceable against it.

The court rejected the owner’s argument and held that the owner need not have expressly consented to the particular work at issue, nor had any direct dealings with the contractor, for the lien to attach to the owner’s interest in the property. Rather, “the owner must either be an affirmative factor in procuring the improvement to be made or having possession and control of the premises assent to the improvement in the expectation that he will reap the benefit of it.”

To determine whether the owner’s interest can be subject to a lien, the terms of the lease agreement are important. In particular, where the lease agreement requires the tenant to make certain improvements, the owner will be deemed to have consented to those improvements. The Court contrasted its prior decision in Rice v. Culver, 172 N.Y. 60 (1902) where the lease agreement, at best, merely authorized the tenant to make certain improvements. There, the tenant leased the property to build and maintain an athletic field, and was given the general right to construct and improve buildings upon the land. While the owner “must have known” that the tenant intended to make improvements upon the land, that general knowledge was insufficient to show that the owner consented to the specific work in issue which resulted in the filing of a mechanic’s lien.

The Ferrara Court found that the lease agreement evinced owner’s consent to the work. The lease agreement “not only expressly authorized [the tenant] to undertake the electrical work, but also required it to do so to effectuate the purpose of the lease[.]” Further, the lease provided that owner was “to retain close supervision over the work” and permitted owner to “review[], comment[] on, revise and granted ultimate approval for the design drawings related to the electrical work.”

Although the Court did not look to the parties’ course of conduct, it noted that consent need not be founded on the lease agreement alone. Consent can also be founded on the “owner’s overall course of conduct and the nature of the relationship between the owner and the lienor[.]”

Ferrara makes clear that an owner cannot insulate itself from liens on their real estate solely because it does not have direct dealings with the lienor. Where the lease requires certain improvements, and a lien is filed as a result of such improvements, the owner faces liability under the lien law despite having no direct dealings or even knowledge of the particular lienor’s work.

In a recent unpublished decision, the Appellate Division again confirmed that a zoning board may not reverse course without justification once it has made findings regarding a specific property.

In Oster v. Zoning Board of Adjustment of the Township of Middletown (Docket No. A-0037-17T3, decided January 11, 2019), the applicant sought and obtained a hardship variance from the Zoning Board (the “Board”) pursuant to N.J.S.A. 40:55D-70(c)(1). The variance, which was obtained in 2009, permitted construction of an underground storage area and above-ground conservatory within the side yard setback. The Board concluded that a variance was warranted because of the construction difficulties posed by the property’s unique shape, irregular configuration and use as a vineyard.

In 2016, the applicant abandoned the original development plan approved by the Board and filed an application seeking a variance to build an underground storage area/garage with a peaked roof in the same location. The Board, however, disregarded its prior 2009 ruling concerning the property’s unique characteristics (even though the property’s shape and use remained unchanged) and denied the requested variance relief. The applicant subsequently challenged the decision in a prerogative writ action, but the trial court sided with the Board.

The Appellate Division reversed after finding that the Board was required to honor its prior ruling concerning the property’s unique character. The court held that the doctrine of collateral estoppel bars a zoning board from re-litigating any issue that was actually determined by it during a prior application. Consequently, the court instructed the Board to conduct further proceedings on the sole issue of whether the applicant had satisfied the other requirements for c(1) variance relief.

This decision underscores the importance of reviewing all prior land use applications and decisions when pursuing or objecting to variance relief for any given property.

In Farmland Dairies, Inc. v. Borough of Wallington, N.J. Super. App. Div. (per curiam) (unpublished decision) (35-2-7909), the Appellate Division upheld the decision of the Tax Court in denying an unrelated neighboring property owner’s efforts at intervening in a pending local property tax appeal between the property owner and the Borough. The court concluded that the intervention application of the putative intervenor was out of time and barred by the statute of limitations. Although all residents of municipalities have standing and maintain the right to pursue tax appeals as “aggrieved” parties under the statute, including those related to their neighbor’s properties, any such contests must nonetheless comply with the statutory filing deadline.

The New Jersey Supreme Court has consistently recognized the necessity of complying with filing deadlines in the area of taxation. The statutory scheme establishing the court’s jurisdiction in this area is “one with which continuing strict and unerring compliance must be observed.” SeeMcMahon v. City of Newark, 195 N.J. 526, 546 (2008). Indeed, our Supreme Court has declared that the “failure to file a timely appeal is a fatal jurisdictional defect.” F.M.C. Stores v. Borough of Morris Plains, 100 N.J. 418, 425 (1985). The Supreme Court has also explained that strict adherence to statutory filing deadlines is of particular concern in tax matters, given “the exigencies of taxation and the administration of local government.” F.M.C. Stores, 100 N.J. at 424. The Legislature “has attempted to set out a well-organized time-table for the purpose of enabling a municipality to ascertain the amount of taxable ratables within the jurisdiction in order that it might adopt a responsible and fairly accurate budget.” Id. at 425. “By incorporating a strict deadline in [the statute], the Legislature intended to ensure that municipalities receive timely notice that a particular property’s valuation is subject to challenge.” Prime Accounting Dept. v. Township of Carney’s Point, 2013 N.J. Lexis at *31.

After previously remanding the matter to the Tax Court for further proceedings concerning the timeliness and propriety of the putative intervenor’s application for permissive intervention, the Appellate Division made it plain, mindful of the above-referenced well-settled jurisprudence, that any effort to intervene must, in the first instance, be timely pursued and that the annual tax appeal filing deadline will effectively wait for no one.

Although as demonstrated above, the inviolate nature of this statutory deadline is plain, the court’s decision here may have been made easier by the attendant distasteful nature of a case involving an unrelated party’s efforts at meddling with pending litigation between the real parties in interest (the actual owner of the property in question and the municipality).

In a market where economic indicators continue to show encouraging signs (e.g., decreasing vacancy conditions across market segments, improved employment numbers and rental rates, and continuing low levels of inflation), the prospect for property value appreciation exists. Because of questionable municipal assessment practices, often blindly motivated by the objective of maximizing tax ratables, careful scrutiny of assessments, especially in changing market conditions, is warranted. Consequently, it behooves commercial property owners to review their property tax assessments with their professionals now to ensure that their assessments are in line with present values and to verify that they are not paying more than their fair share of taxes. At the same time the potential exists that a successful appeal can work to lock in assessments at current property values, even in the face of possible increasing values.

Because New Jersey law provides for a “Freezing” of assessments for a period of two additional years, beyond any successful year appealed, the tax appeal vehicle has positive effects reaching into the future as well. In fact, because assessments are generally not modified until a town-wide revaluation or reassessment program is implemented (usually every 5-10 years), there is a real prospect that a lower assessment achieved as a result of a successful appeal could actually remain in place for well beyond the statutorily guaranteed two year “Freeze” period.

As a result, we believe that there continues to be substantial opportunities for property owners to realize significant tax savings and lock in current values for the foreseeable future. We therefore encourage commercial property owners (whether owners of office, industrial, manufacturing, hotel, multi-family and/or other special purpose properties) to discuss options for a tax appeal with counsel having expertise in this specialized practice area. In addition, those property owners who may benefit from statutory tax exemptions relating to non-profit, institutional or religious organization owner/users should similarly be reviewing with counsel whether all benefits available to them are being realized.

Because the 2019 tax appeal filing deadline is rapidly approaching (April 1, 2019, or May 1, 2019 in the case of a town-wide reassessment or revaluation) now is the appropriate time to take action.